HSBC Launches Jersey Probe as UK Tax Authorities Confirm Whistleblower Leak

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By Martin Baccardax | November 9, 2012 8:39 PM EST

A branch of HSBC bank is seen near Westminster Abbey, in central London

HSBC is investigating a report, first published in Britain's Daily Telegraph newspaper, that a whistleblower within the bank has handed details of more than 4,000 clients which could be connected to potential tax evasion and money laundering to British authorities.

Europe's biggest bank, which recently warned investors it faces billions of dollars in fines and penalties to settle money laundering charges in the United States, said it will investigate the report "as a matter of urgency" but added that it wasn't aware of any official probe by either HM Revenue & Customs or any other UK government authority.

"We are investigating the reports of an alleged loss of certain client data in Jersey as a matter of urgency," the bank said in a statement. "Should we receive notification (of an investigation) we will cooperate fully with the authorities."

HMRC, the UK's chief tax authority, confirmed it had received the data, said to contain the names and personal details of nearly 4,400 HSBC account holders, worth around £700m in deposits, on the island of Jersey, and that it was studying it for potential tax-law violations.

"Clamping down on those who try and cheat the system through evading taxes and over-claiming benefits is a top priority for us, and we value the information we receive from the public and business community".

The Daily Telegraph reported late Thursday some of the names said to be included in the account list, which the paper said had connections to serious criminal activity including drug dealing, weapons possession and financial fraud.

HSBC shares fell around 1.3 percent in London trading to change hands at 595.3 pence each. The shares have fallen nearly 5 percent since the bank revealed its legal liability for money laundering charges levied by US authorities could be "significantly higher" than the $1.5bn it has already set aside.

"The third quarter results include an additional provision of US$800m in relation to the on-going US anti-money laundering, Bank Secrecy Act and Office of Foreign Assets Control investigations," said CEO Stuart Gulliver in a statement. "We are actively engaged in discussions with US authorities to try to reach a resolution, but there is not yet an agreement. The US authorities have substantial discretion in deciding exactly how to resolve this matter. Indeed, the final amount of the financial penalties could be higher, possibly significantly higher, than the amount accrued. 

US Senate investigators released a damning report this summer detailing more than a decade of lax controls it said linked HSBC to money-laundering, terrorist funding, tax evasion and financial ties to Iran that violate US sanctions.

The Senate probe, which also lays heavy criticism on HSBC's prime US regulator, the Office of the Comptroller of the Currency, went so far as to suggest that lawmakers consider revoking its charter to operate in the United States. 

The 335-page report from the US Senate Permanent Subcommittee on Investigations, which draws from 1.4m documents and interviews with 75 HSBC officials, describes a "pervasively polluted" culture and a "dramatic failure of accountability" at HSBC, according to Senator Carl Levin, the Committee's ranking lawmaker.

His Committee accuses the bank of using a global network of branches and a US affiliate to create a gateway into the American financial system that led to more than $30bn in suspect transactions linked to drugs, terrorism and sanctioned companies in Iran, North Korea and Burma.

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